Capital Formation: the evolving role of public and private markets
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Public markets and public corporations are intrinsically linked. Not surprisingly, then, changes in the nature of public markets are causing changes in corporations, and vice versa. Public corporations have been experiencing significant changes since their definitive modern form—based on dispersed equity ownership and common shareholder rights—took hold in the early 20th century. The increased prominence of shareholder value maximization considerations in the late 20th century caused corporations to become more narrowly focused on maximizing profits. Today, investors and company management are apparently shifting their attention to nonfinancial considerations, including corporate and environmental sustainability. At the same time, pressure on public corporations is growing, due to increasing corporate disclosure requirements, listing standards, and governance practices. Entrepreneurs often complain that being a public corporation is increasingly or excessively onerous.